Is Groupon worth $5 billion or $25 billion?

Posted by Knowlton Thomas

It's been rumoured by inside sources that Groupon is preparing for an initial public offering by the end of this year - in fact, as soon as this spring. The valuation was initially pegged at around $15 billion, but Bloomberg recently reported that its valuation could run as high as $25 billion - which would trump Google's $23 billion IPO and make history with a pace of growth unprecedented.

Quoth Mashable:

Groupon raised eyebrows when it turned down a $6 billion acquisition offer from Google in December 2010. The startup then went on to raise $950 million in a Series D round — including funding from Starbucks CEO Howard Schultz’s investment firm — with an estimated post-money valuation as high as $7.8 billion.

We do know that Groupon generated $760 million in sales in 2010, according to a leaked internal memo from CEO Andrew Mason in February. Plus, rumors at the time of the Google acquisition talks had it that the company’s annual revenue run rate was $2 billion.

But the numbers don't add up for IAC founder and chairman Bob Diller, who at South by Southwest said that Groupon's valuation is "mathematically insane," suggesting the potential for a tech bubble as experienced during the 2000 dot-com crash.

Quoth CNN:

The bubble question is much-buzzed-about at SXSW, which is a a magnet for digital movers and shakers. Some of its past breakout stars -- like Twitter -- have drawn funding rounds or acquisitions offers that give them eye-popping valuations. Asked if there's a new bubble forming, Diller answered: "Well, we're puffing it up pretty nicely."

In the end, a company is worth what investors are willing to pay for pieces of it - and therefore value it at. So until an IPO occurs, and real money flows, Groupon is worth as much as can be proven so far, which is somewhere between Google's $6 billion offer and the $7.8-billion valuation via the startup's latest funding.

Company:
Groupon
Website:
http://www.groupon.com
Location:
Chicago, Illinois, United States

Launched in November 2008, Groupon features a daily deal on the best stuff to do, see, eat, and buy in a variety of cities across the United States. We have about 200 wonderful people working in our Chicago office (a handful of whom you can see to your right), along with a smattering of people in Groupon's other cities. Our company philosophy is pretty simple: we treat our customers the way we like to be treated.... more


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Knowlton Thomas

Knowlton Thomas

Knowlton is the managing editor of Techvibes. Based in Vancouver, Knowlton has been published in national publications and has also appeared on television and radio. Previously he was an editor for New Westminster weekly The Other Press and served on its board of directors. When not working, Knowlton enjoys playing tennis or otherwise enjoying the outdoors. more



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